Update July 3, 2008 – Ply-Marts, Inc. Subject of Involuntary bankruptcy petition

In another blow to the building and housing market, a large building supplier goes into receivership.  In an Order dated June 23, 2008, U.S. District Court Judge Camp of the Northern District of Georgia, appointed Lee Katz of Grisanti, Galef & Goldress  as the Receiver of Norcross-based Ply-Marts, Inc. (which does business as Ply-Mart and PlyMart).  The Order was entered in the case of Bank of America v. Ply-Marts, Inc., No. 3-08-cv-072-JTC (N.D. Ga. filed June 23, 2008) (download the Complaint and Emergency Motion to Appoint Receiver).  Ply-Marts consented to the appointment of the Receiver.

Rachel Tobin Ramos has an article in the Atlanta Journal Constitution about the Order and Ply-Marts’ financial troubles:

Ken Southerland, PlyMart’s president and CEO, said that the company has one solid offer for its specialty and custom stair divisions, with several in the wings if the first doesn’t go through. Those divisions operate in Georgia, as well as Greer, S.C., and Charlotte, N.C.

In the meantime, two Georgia PlyMart lumber locations are still operating through the liquidation process: 2009 Dorsey Road in Marietta and 1159 Hog Mountain Road in Winder. The stair and special order division is still operating as well, and the Web site is still functional.

Southerland said that the company — which at its peak employed about 1,150 with $360 million in sales — now employs about 300.

The article also mentions the possibility of bankruptcy :

Receivers, similar to bankruptcy trustees, take full control of a company and act as managers to preserve value for creditors, according to Scott Riddle, an Atlanta bankruptcy and litigation attorney, who is not involved with this case. Receivers also have the authority to take a company into bankruptcy if needed, he said, although that has not been determined in the PlyMart case.

Thanks for the mention, Rachel.  Although bankruptcy is often a possibility, here Ply-Marts consented to the appointment of a receiver so it appears unlikely they would opt for bankruptcy (even though the directors could likely authorize a filing even over the objection of the receiver). However, for creditors, bankruptcy is often advantageous because, among other things, it provides for avoidance actions, such as preferential transfer actions, that are not available under state law.  Generally, a bankruptcy trustee has more powers than a receiver.  It is more likely that the creditors of Ply-Marts consider an involuntary bankruptcy petition if it would be advantageous to them.

 The Atlanta Business Chronicle also profiled Ply-Marts’ troubles just a few weeks ago in Housing Drive Slams Ply-Marts, by Lisa Schoolcraft. 

With $20 million in accounts receivable uncollected and Ply Mart’s sales a quarter of what they once were, Ply Mart Chairman Randy Mahaffey said this market "has been all of the challenge that anyone can stand." …  Nearly two years ago, Ply Mart had $400 million in annual sales, but today that number is closer to $100 million, Mahaffey said. …

Ply Mart is one of Atlanta’s top 100 private companies, ranking No. 34 in 2007, according to Atlanta Business Chronicle’s 2007-2008 Book of Lists. Atlanta Business Chronicle also named it one of Atlanta’s Best Places to Work in 2006…  "We’ve had to reduce operating expenses dramatically," Mahaffey said. In September, the company had 961 employees and cut staff to about 700. Employees also took pay cuts of 10 percent to 20 percent. …  But then came a second round of staff layoffs to about 515 employees and in April the company pared down staff to a little less than 450, he said. … Operational cutbacks have closed half of its facilities and reduced the number of lumber yards from 11 to five, Mahaffey said.

The article also mentions another builder, Manis Lumber (d/b/a Wheeler’s):

Manis Lumber Co. of Rome, which once had $200 million in annual revenue, filed for Chapter 11 bankruptcy reorganization Feb. 11. The company did business as Wheeler’s throughout metro Atlanta.

Like Ply Mart, Wheeler’s saw its sales drop from a peak of $20 million a month to $4 million a month and saw its accounts receivable "getting staler and staler," said G. Frank Nason, a bankruptcy attorney with Lamberth, Cifelli, Stokes, Ellis & Nason P.A. in Atlanta.

Nason represented Wheeler’s, which recently sold most of its assets to former owners Mark and Jim Manis as Home Team Builders Services LLC.

When Wheeler’s filed bankruptcy, 64 percent of its accounts receivables were beyond 90 days, he said.